Tuesday, August 3, 2010

Boom & Bust: A Trip Down History Lane in Rocky Point, Mexico

Beach Buzz -by La Huerita

A lot has been said and written about the recent real estate boom and bust in Puerto Penasco over the last couple of years. But in fact, that was not the first boom/bust period in Rocky Point's history and it may not be its last. A little traveling music, please, as we take a short trip down history lane.

From the mid 1960s to the early '80s, as the world price for shrimp soared, RP became the center of Mexico's fishing fleet. Hundreds of commercial fishermen flocked to the town, fortunes were made and RP became Sonora's 4th most important city. Many of the big homes you see in the area today (in various states of repair) stem from that boom. It was a good long run, but the sea was overfished, the bottom fell out of the shrimp/commercial fishing business and KABOOM! Hundreds of people left town, losing their homes and businesses as mortgages, loans and account payments were called. Rocky Point slipped into a "bust" period.

Then in the late 1980s Mexico's Federal Government sent an exploration group to Penasco to see if there was oil there. As you can imagine, speculation ran wild, hotels charged outrageous prices for rooms, everything became more expensive, and the price for any property rumored to contain oil, was next to a property rumored to have oil or that had even been visited by the group went through the roof. But of course no oil was found, the group left, and Penasco slumped back into near obscurity.

But throughout that period there were plenty of folks from north of the border who kept on coming down, in ever increasing numbers, to relax by the sea, party, have a good time. There was a stint in 1990/91, during the First Gulf War, when tourism throughout Mexico tumbled as Americans felt unpatriotic to "party" while a war was being waged, but overall a Penasco saw slow but steady growth in the number of RV parks, hotels, beach homes and "tourist" zones to accommodate them. By the early '90s, US citizens began investing in restaurants, construction, advertising, real estate, etc. in a serious way, with any eye toward building the area up as a tourist/second home destination. In the early '90s Grupo Situr, one of Mexico's biggest real estate development companies, built one of the first of the first condo/timeshare/hotel complexes in town, called Plaza Las Glorias (now the Penasco del Sol).

Oops! Were any of you around in 1994 when the peso was devalued? The peso crashed under a floating regime from four pesos to the dollar to 7.2 to the dollar in the space of a week. I was in Cabo San Lucas at the time, and I can tell you the fallout from that was profound. Grupo Situr, mentioned above, was caught off guard and became one of the biggest victims of the devaluation, ultimately forced into bankruptcy and liquidated. Mexicans and all foreigners with Peso denominated investments/bank accounts lost a whopping 30% of their value overnight. Inflation rose about 40% a year and, especially in resort areas, both locally and foreign owned businesses started requiring U.S. dollars as payments on Mexican services and debts. The United States intervened rapidly, first by buying pesos in the open market, and then by granting assistance in the form of $50 billion in loan guarantees under President Clinton.

The dollar stabilized at the rate of 6 pesos per dollar. By 1996, the economy was growing again, peaking at 7% growth in 1999. In 1997, Mexico repaid, ahead of schedule, all US Treasury loans.

Skipping forward, by the turn of the century gringo tourism to Penasco-- almost entirely from the state of Arizona-- was growing fast. Cholla Bay was well established, Playa Bonita Resort Hotel was no longer new, more homes were going up in Las Conchas, the first condos at Sandy Beach Resorts were on the way, things were looking pretty good. Then came a stroke of luck for little Penasco, in a kind of gruesome way.

I refer to the Sept. 11, 2001 attack on New York and the Pentagon. One of the results of that horrific event was that people became afraid to fly. As a result, drive-to destinations saw a noticeable increase in traffic. Rocky Point was one of those places. It's location, an easy drive from southern Arizona, plus its great beaches made it very attractive as both a vacation and potential retirement spot.

The real estate boom that then occurred in the USA spilled over into Rocky Point, with prices for beachfront real estate relatively affordable there compared to the USA prices. That created a mirror boom in Penasco, with condos and other real estate offerings growing at a dizzying pace, accompanied by a similar increase in prices.

And we all know what happened next. The real estate boom proved to be a bubble. It burst. The bottom fell out. Real estate prices tanked. Companies went bankrupt. Etc.

Added to that came the perfect storm of the Swine Flu virus, which killed tourism throughout Mexico, and then the deadly battles among the drug cartels that turned Mexican border towns into war zones. Suddenly Rocky Point's location as a drive-to destination switched from being a positive to a negative, as hysteria not backed up by facts took over in the press and in people's perceptions. Unfortunately, perception is reality to too many people, and as a result this issue has all but put the kibosh on the growth of tourism from north of the border for the immediate future.

Puerto Penasco is experiencing yet another bust. Eventually, though, this too shall pass...

Ironically, tourism in the area is picking up at a good rate from within Mexico itself. Summer is prime vacation season for Mexicans, with the kids out of school, etc., and they flock to the beaches just as gringos do north of the border. Puerto Penasco is within easy reach of places like Hermosillo, Mexicali, and other northern Mexico cities, and the vehicles bearing Baja and Sonora plates from out of town have been ubiquitous in the parking lots of hotels and condo developments in town. And with the arrival at the new airport on July 30 of a 737 charter flight from Ciudad Juarez, the first of several that are planned, a new era may be opening up. It carried 110 passengers, and you can be sure they were welcome!

The plan is to have flights on Fridays and Mondays, a flight of merely 1 hour and 15 minutes for those coming from El Paso, Texas and Ciudad Juarez, Chihuahua. As more flights become available from other cities, it is possible that more tourists will choose to fly in rather than drive.

But that eventuality will depend on more people from outside of Arizona learning about the place and actually wanting to visit. And THAT will require some heavy duty lifting in terms of marketing and amenities.

In the meantime, with all the safety worries rampant among Arizonans (and elsewhere), it appears that the good people of beleaguered Ciudad Juarez find Puerto Penasco a nice safe place to enjoy some sun, sand and surf.

What a lovely irony!

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